Good, but not good enough

Oil and gas severance tax bill includes money for counties

March 2, 2014

LISBON - A revised bill increasing the state's oil and gas severance tax requires a portion of the proceeds go to counties most impacted by the drilling activity, the first time such a provision has been included.

The revised severance tax bill introduced in the state legislature in early February by state Rep. Matt Huffman, R-Lima, would require 10 percent of the additional tax revenue go to counties impacted by the oil and gas boom underway primarily in eastern Ohio.

The original severance tax bill introduced in December by Huffman did not earmark any money for impacted counties. The revised bill comes weeks after local officials began lobbying the legislature to require some of the proceeds go to impacted counties to help with road maintenance and other infrastructure issues resulting from the additional heavy truck traffic.

Columbiana County Commissioner Tim Weigle is one of those local officials, and while he is pleased with the revised version, he believes it does not go far enough to address the concerns of impacted counties.

First, only 5 percent would go directly to impacted counties, with the other 5 percent allocated to a nine-member Ohio Shale Gas Regional Commission created by the bill. Half of the proceeds going to the commission cannot be spent until 2025, while the rest would be used by the commission as a match to obtain other funding for infrastructure improvements.

The 5 percent of the gas tax money directly funneled to impacted counties would go to the county budget commission, which would decide how to appropriate the funds. The budget commission is comprised of the county auditor, treasurer and prosecutor, the same board charged with approving a plan for distributing state Local Government Fund money. Under the current LGF plan, county commissioners receive half of the money, with the other half distributed among cities, villages and townships on a per capita basis.

Weigle said the 10 percent for impacted counties would come from what is left after $21 million is taken off the top every year for the Ohio Department of Natural Resources to enforce drilling regulations, cap and plug abandoned wells, and the ODNR's geological mapping program.

"We want that coming off the top end and not off the bottom end ... before you start draining the kitty," he said.

Whatever is left would be used to reduce the state income tax rate even further, from 5.33 percent to under 5 percent for individuals and small businesses.

Weigle said commissioners also want some assurances that whatever gas tax money received by impacted counties would not be offset by reductions in the county's annual LGF allocation. In other words, if the county receives $100,000 in gas tax money, commissioners do not want the legislature to cut the annual LGF allocation by the same amount.

While the revised bill is an improvement over Huffman's original severance tax bill, Weigle said the County Commissioners Association of Ohio will continue to lobby the legislature to ensure it provides impacted counties with as much of the revenue as possible.

"My guess is it's going to change some more after if goes to the Senate and when it goes to (conference) committee after that," Weigle said.

After Weigle made this comment he learned a bill amendment was being introduced by the state representative from Zanesville that would increase the share of severance tax revenue going to impacted counties from 10 percent to 25 percent. It would also prohibit the LGF allocations from being cut to offset severance tax revenue received by counties.

Under the proposed amendment, three-quarters of the above mentioned 25 percent going to impacted counties would be set aside for distribution by the new regional commission, with 20 percent going to counties and distributed based on the LGF formula in place. The remaining 5 percent would go townships, with a special township committee created in each county to decide how to allocate the money.